The Value of International Trade written 2011/04/22

People have to be able to trade surplus goods or goods produced specifically for trade, for things they marginally value more. Trade with South America for Apples, if the cost of transportation makes it worth it, represents relative value, assuming there is no ability to keep apples fresh all winter. Trade itself is a relative value. We need it to enhance our comfort and safety. It is a better way to adjudicate conflict over scarce goods than warfare.

Differences in resources are a reflection of political power, and differences in political power are a reflection of differences in resources. Ownership at root is power. Rule is ownership. It is the ability to measure out (rule) boundaries and enforce them. So when people can’t eat, sleep, or survive, it is a political matter as well as an economic one. There is no credible distinction between economic and political power except that economic power reflects possession while political power drives possession. The many kinds of power are usually exchangeable. Policy, Policing, Economics, Sociology, as well as law and government, are all about politics. Politics is about getting things done which is about organizing human affairs. It is only a bad word when people reify it and don’t understand it.

A morally disciplined alternative to violence

In the past survival has often meant enslavement and oppression. We can do better than that. Conflict will not be removed by applying logic to moral principles or practicing moral discipline, but some kind of trade off, some kind of trade can be worked out. It is in this arena that principled logic becomes valuable. By applying logic to moral principles, or practicing moral discipline, people can organize their actions so that those who need things can find something to trade for their survival.

Principled reasoning means that one works with established principles to ensure that they are applied factually, equitably, and logically. It is the basis of justice. People who don’t believe in social justice (such as Glen Beck admitted when debating Madison just before his rally last summer) don’t believe in applying principled reasoning to adjudicating differences. They might as well be on the side of tyranny.

Using Markets to Establish participation.

Usually when Free Market advocates advocate for “competition” they aren’t talking about warfare or oppression so much as finding ways to leverage innovation and comparative advantage to enable people to participate in trading instead of fighting. What they are advocating for is the ability of everyone to participate in markets on a somewhat equal basis.

The alternative to competition as war is to intentionally bring people into markets. This is the idea behind the “fair trade” movement. If people can establish trade goods, establish ownership over their property (either through purchase or through being allowed to claim for possessions), then they can have the assets necessary to trade for things they need that may not be locally available. If they can do that, the urge to bomb, maim, kill, kidnap or steal can be minimized. This reduces risk for everybody and so would be worth doing even if it didn’t increase the size of the overall relative human pie — but it does that too.

Pulling down the false God of Competition

When people make “competition” a God they usually wind up talking in terms of war. They don’t want Mexicans and Latin Americans coming to the USA because they fear the competition. Or they fear competition from China on economic goods. Or they’ll claim that Chinese goods are superior to American Goods and they welcome competition because it makes them wealthier. It was a truth when Mao and Lenin said that Capitalists would sell their enemies the shovels with which to bury them. Anything for a quick buck.

A little history

When the British moved into their economic imperial mode they limited the ability of their colonies to compete with workers in Britain. One unforeseen consequence of this is that many of the colonials ended up moving to Britain, but the other consequence was that their colonies were basically run on an organized kleptocratic model that amounted to war by other terminology. The only comparative advantage available to colonials was as a source for raw materials. The British stripped out the wealth producing (and thus real wealth) of their colonies by neo-colonial methods in China [with help from the rest of us] and by open colonial oppression in their other colonies. In the process they opened themselves to imports from Britain, enriched a few folks at the top, and were able to put a benevolent face on what was basically a parasitical empire.

But asset stripping, kleptocracy, and monopoly are never long term beneficient policies as there are real benefits to local people being able to participate in the world-wide economy and manufacture and innovate themselves a place in international markets. Aristocracies by their very nature oppress people, but local aristocrats are created by the very process of creating imperial aristocracies, and so Comercial imperialism as practiced by the ancients, by Athens, Venice, and Britain, is self limiting. Eventually the locals can’t afford to buy goods made in the central country and either start making them themselves, or become a burden on the country oppressing them, which usually can’t understand that it created all the poor people coming over its borders or angry at them. The common folks in the Imperial power usually don’t benefit from it and they get tired of it too.

Neo-Colonialism enlists help from local elites in doing the same thing to just about everybody but promises to be a longer lasting phenomenom because it enlists local powers to oppress and disguises its oppression under hypocritical practices of principles such as “free trade” or “international order.”

An Alternative

In the long run both colonialism and neo-colonialism are limited phenomena, unstable phenomena, and detrimental, degrading to human survival.

What makes an international system work is limited competition based on innovation and genuine comparative advantage combined with improvements that “float everyone’s boat” rather than amount to war by another name.

To get there we need economic, political and legal systems that recognize the importance of the common good and that enable people to acquire property, acquire tools, trade goods and services, and then trade those goods and services for their needs. Such a system cannot be based purely on competition because that simply invites warfare. It cannot be based on forcible distribution or redistribution except to the extent that any legal system needs to enforce rules. Ayn Rand was right to make that point. What she didn’t seem to be willing to recognize is that capitalism is a forcible system as much as communism was. (She also was historically and fact challenged but what the hay).

Principles of a Viable Market

To do that we have to recognize that market creation is a governing function. That innovation and creativity have to be rewarded by policy and economic allocation. And that in order to have a market society that works for everybody, everybody must be able to trade something of value. When the participants are equally free to participate in transactions — that is a free market.

These require laws. Workers can only exchange labor for a middle class life if they have the opportunity to make a living wage. Entrepreneurs can only innovate if they have access to capital. The wealthy will get wealthier without doing much; as long as they can practice usury and can govern other People’s money. They need to be taxed and regulated. Producers need some stability to stay in markets. Vendors as well. There have to be agreeable limits for everybody involved, else people turn competition into war.